3 Strategies to Manage Money as a Couple with Debt or Income Disparity

Managing money as a couple can be tricky to sort out with two incomes and two financial situations merging. While you’re trying to manage money jointly, there could be major disparities in pay, previous debt loads and differences in budget and lifestyle expenses.

So how do you successfully manage money as a couple, especially when one partner is the clear breadwinner, or the other half is shouldering steep credit card or student debts? Is there a fair way to create a shared account, aligned savings goals, and joint financial responsibility?

Different Strategies are Needed – No Two Couples are Alike

As it turns out, there is no one-size-fits-all to this question. While there are a multitude of ways to determine how to best manage finances with your partner, choosing the right option is a decision made together.

Here’s a look at some of the most common scenarios couples face when merging their finances along with the most opportune ways they can build shared financial plans even with major differences in their money management.

Strategy 1: Combine Your Incomes

In this scenario, both of your incomes are deposited into a joint chequing account and you need to ensure both people are using the account responsibly, that you’re adhering to an agreed upon budget, and you’re maintaining trust and communication.

To make this work, your need to sit down with your partner, tally up your joint income, and then carve out and agree on a budget that covers all shared expenses, from housing to groceries and bills, along with debt repayments and everyday spending. As a duo you’ll also identify how you will save money and identify your shared goals and how to attack them.

The pros: In this case, it doesn’t matter if one person makes twice as much money as their partner because this budget is balanced with your pooled income. There is no distinction between what’s mine and what’s yours because all funds and expenses are deposited and withdrawn from this same account.

A word of caution: This means you also need to agree upon discretionary spending – while one partner’s vice may be cigarettes and Starbucks, the other’s could be comic books and movie tickets. With your finances so intertwined, you need to be accepting and on the same page with your spending.

Pros and Cons of Joint and Separate Bank Accounts

Strategy 2: Create One Shared Joint Account

While this scenario is similar to the first, it offers some wiggle room for each partner to have some financial independence. In this case, partners keep their own individual accounts but they have one joint account for all shared expenses, such as their mortgage, groceries, day care, and other household costs.

How to Determine How Much to Share

How do you decide how much money each half should cough up? There are many different ways to approach this question.

• You could each contribute 50 per cent of the monthly shared costs to keep these even, but in most instances this isn’t the resolution.
• Another route is to divide expenses according to each person’s income. If one person earns 70 per cent of the dual income, he or she is responsible for 70 per cent of the budget, for example. Other couples also interpret this option according to how much they think each portion of their income should be allocated to each category.
• If in a couple, one half earns three times more, the lower-earner may cover the smaller bills, such as monthly car insurance, Internet and phone bills, and groceries, while the higher earner takes care of the mortgage, property taxes, and car payments.
• In other instances, if one partner has debt, their monthly debt repayments could be deducted from his or her income so they can focus on their shared goal of becoming debt-free.

In this scenario, couples need to discuss and agree on a resolution that makes both partners feel like they’re contributing their fair share and are satisfied with what their partner is bringing to the table. Each person also maintains their own separate bank account for the rest of their funds.

How People Get Caught by Joint Debts

Strategy 3: Go Dutch

In this scenario, all finances are kept separate with mortgage payments and other bills split right down the middle, without any joint accounting binding the household together.

All consumer debt and student loans are separated too, so your partner isn’t factoring in your debts into their budget. If the relationship falls through, it’s a clean breakup without one partner feeling like they may be on the losing end propping up their significant other financially.

As a couple you’ll have short and long-term goals – with completely separate accounts you need to think about how you’ll attain these goals, such as paying for a trip to paying for a down payment on a house, with a shared vision and action plan.

Tips to Help You Manage Money as a Couple

Along with these 3 strategies to manage money as a couple, we have a few more tips to make it easier. They can be incorporated in any of the strategies, or a blend of the strategies, whatever works best for you. Draw on your strengths and look forward to a stable financial future!

• Have a slush fund: Regardless of which strategy you choose, work a slush fund into your budget. It’s an allowance — say, $100 per person — that you can spend freely, no questions asked and no nagging. The amount is based on what your budget allows. You could spend it every month on a new pair of sneakers or you could save it up to splurge on a trip. While everything else is a joint decision, what you do with your monthly allowance is an individual choice.
• Take a money management course together: This step may help couples understand how they developed their habits with money. That way, both partners know their history with money and what they learned growing up. This class will also help you develop your long-term goals and identify each person’s triggers, strengths and weaknesses with money. It will also help you find more positive ways to communicate about money.Workshops and Webinars – Check Out Our FREE Public Schedule
• Disclose your debts: Don’t hide your debts from your partner before choosing to move in together or merge finances. Keeping them in the dark could worsen the situation. Counsellors have seen spouses who, for example, seek help because they’re tens of thousands of dollars in debt and refuse to tell their partners.
• Understand a team dynamic: In many instances, some spouses equate power in the relationship to who earns more. One spouse may feel he or she doesn’t hold as much weight in decision-making, or they may feel indebted or guilty. The other may feel like they are carrying most of the weight. Some tasks, such as child rearing, are invaluable even though they don’t have a pay cheque attached to them. By employing strategies to manage money jointly, couples can work together as a team.

What to Do When Managing Money as a Couple Doesn’t Work

It can be hard to arrive at an agreement about how to manage money jointly. For many couples, they start combining their lives, and their finances get intermingled in the process. Backing up and having the money talk can be hard; arriving at common middle ground even harder. Rather than fight with your partner, seek professional help. You might need to speak with one of our Credit Counsellors for an unbiased look at your current situation. Other professional services might be helpful too, e.g. a financial planner, accountant, or a couples’ counsellor (check your extended benefits through work to see if you qualify for coverage). But if you really don’t know where to start or what to do about the debt, we’re here to help.

Related articles:

How to Pay Off and Make Joint Debt Work

Joint Debt Problems: How to Deal with and Avoid Joint Debt?

How to Budget Your Money: Budgeting Tips to Help You Save